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What's in the Offing for Macquarie (MIC) in Q3 Earnings?

Zacks Equity Research
Updated

Macquarie Infrastructure Company MIC is scheduled to report third-quarter 2018 results on Nov 1.

The company pulled off an average positive earnings surprise of 8.05% in the trailing four quarters, beating estimates twice. Notably, in the last reported quarter, the company posted earnings of 45 cents, which beat the Zacks Consensus Estimate of 41 cents by 9.76%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Of late, Macquarie has been enthusiastic about the prospects of its Atlantic Aviation segment. The business has been riding on higher GA flight activity and strong contributions from fixed base operations acquired in 2017. Also, the company’s Contracted Power segment is enjoying bullish momentum. The segment is currently gaining strength on the back of increased tariff-based sales from the thermal power generation plant and enhanced wind resources. In addition, it believes that implementation of new gas rates (July 2018) will bolster MIC Hawaii segment’s revenues, going forward.

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Also, Macquarie intends to deploy approximately $300 million in bolt-on acquisitions and strategic growth projects in 2018. So far this year, the company has invested around $200 million for the completion of a new power generating facility, building up additional capacity in the IMTT segment and acquiring a fixed base business operating within the Atlantic Aviation segment (January 2018). It expects these moves to boost its revenues and profitability in the third quarter.

Moreover, Macquarie recently completed the divestiture of Bayonne Energy Center. It expects the transaction to strengthen its balance sheet and enhance financial flexibility going forward. Eliminating transaction fees and other expenses, the company realized around $649 million proceeds from this $900 million spin-off. It intends to repay its existing debt, fund future growth investments and provide higher returns to shareholders with these proceeds. We anticipate these positives to continue driving Macquarie’s earnings going forward.

Further, the company expects gains from derivative instruments and reduced corporate-tax rates to benefit Macquarie’s earnings in the upcoming quarters. The company currently anticipates earnings before interest, taxes, depreciation and amortization to be $670-$705 million in 2018.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Macquarie in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Macquarie has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 56 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Macquarie Infrastructure Company Price and EPS Surprise

Macquarie Infrastructure Company Price and EPS Surprise | Macquarie Infrastructure Company Quote

Zacks Rank: Macquarie sports a Zacks Rank #1, which increases the predictive power of the ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Key Picks

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Crane Company CR has an Earnings ESP of +0.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Danaher Corporation DHR has an Earnings ESP of +0.20% and a Zacks Rank #3.

ITT Inc. ITT has an Earnings ESP of +1.41% and a Zacks Rank #3.

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Crane Company (CR) : Free Stock Analysis Report
 
Danaher Corporation (DHR) : Free Stock Analysis Report
 
ITT Inc. (ITT) : Free Stock Analysis Report
 
Macquarie Infrastructure Company (MIC) : Free Stock Analysis Report
 
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